What does the word reciprocal tariff mean?
US President donald trump gave a big shock to india on wednesday morning. Addressing the joint session of the US parliament (Congress), he said that india charges more than 100 percent tariff from us, we are also going to do the same from next month. That is, from april 2, donald trump will implement the reciprocal tariff policy on indian products. In his 1 hour 44 minute speech, trump said that what he did in 43 days, many governments could not do in their 4 or 8 years of tenure. Come, now let us tell you what the word reciprocal means and when does a country impose it on another country.
What is reciprocal tariff?
Reciprocal means retaliatory. That is, a tit for tat policy. Understand it like this that reciprocal tariff is a tax or trade restriction that one country imposes on another country when that country also imposes a similar tax or restriction on the first country. Meaning, if one country imposes 100 percent tax on the goods of another country, then the other country can also impose the same kind of tax. Its purpose is to create a balance in trade.
What is the purpose of reciprocal tariff?
Trade balance: To ensure that a country does not impose high taxes on the goods of another country.
Protection of local industries: local industries benefit when foreign goods become expensive.
Part of trade negotiations: Many times countries use it as a negotiation so that the other country reduces the tax.
Disadvantages of reciprocal tariff
Trade war: If both countries continue to impose taxes on each other, then it can turn into a trade war.
Inflation: Consumers are harmed when foreign goods become expensive.
Disruption in supply chain: Trade war affects the global supply chain.
